Gold Assets
Acquisition and Development of Lefa Corridor Gold Project
Acquisition of Guinor Gold Corporation
On October 17, 2005 the Company announced an offer to
purchase 100% of the shares of Guinor Gold Corporation
(“Guinor”), at a price of C$1.50 per common share, in an
all cash transaction valued at approximately C$ 389 million
(US$ 331 million).
Guinor, through its then 85% subsidiary (as of June 30, 2006, a
100% subsidiary) Sociéte Miniére de Dinguiraye (“SMD”),
operates the Lefa Corridor Gold Project in Guinea. Lefa has
operated for over 11 years as a modest heap leach operation and
is implementing a major mine expansion together with CIP
processing through a $169 million expansion scheduled for
commissioning in December 2006.
Transaction Overview
The Crew offer for Guinor was financed by the raising of
approximately $340 million, provided by a limited number of
existing Crew shareholders in Europe. The new financing consisted
of the issue of $194 million in convertible bonds and $146 million
in new equity.
On closure of the tender process, approximately 94% of the issued
and outstanding Guinor common shares were validly deposited
under the offer. Crew acquired these shares on December 9, 2005
and subsequently acquired the balance on March , 2006 through
a compulsory acquisition procedure.
On June 30, 2006, the Company concluded an agreement with
the Government of Guinea whereby Crew acquired the
Government of Guinea's 15% stake in SMD for a total
consideration of $30 million, consisting of $15 million cash and
$15 million in Crew shares. As a result, at June 30, 2006, Crew
held an indirect 100% interest in Lefa.
LEFA Expansion Project
The installation of the CIP plant expansion at Lefa progressed on
schedule during the year. All components of the Kelian CIP plant
purchased in connection with the expansion arrived in Guinea and
were transported to site where they are now being reassembled.
Construction activities progressed on schedule and were
approximately 50% complete at the end of June 2006 and 80%
complete at the end of September 2006. All CIP tanks were
erected, steelwork interconnections have commenced in all areas,
the two SAG Mills and Ball Mill No.1 were installed and the mill
tower crane was completed and fully operational at fiscal year end.
All six engines for the power plant were installed with pipe works started on most of them. Construction of the main tailings storage
dam is also underway and was about 75% complete at fiscal
year end.
Construction work on the six kilometre overland conveyor between
the Lero pit and the CIP plant commenced and the foundations and
mechanical work had been completed on approximately 2.5
kilometres by the end of June 2006.
The CIP plant is scheduled for commissioning during December
2006. Owing to increased fuel costs and the consequent effect on
transportation charges, increased component and raw material
costs and the acceleration of the civil construction and mine
development programmes, the overall capital cost of the expansion
to commissioning is presently anticipated to rise from the 2005
estimate, at the time of acquisition, of $145 million to $169 million.
To June 30, 2006, $127.9 million in capital costs had been
incurred in connection with the expansion including $56.4 million
incurred prior to the Company’s acquisition of the project.
When the plant is completely operational, the annual production
rate is targeted to produce 320,000 to 350,000 oz/year with an
estimated cash cost of $240-280 per ounce before royalties
(royalty payments are 5.4% of gold revenue) based upon current
reserve grade of 1.7 g/t. The Company has recently reported drill
results with substantially higher grades than the historic reserve
grade. Based on these recent results, an aggressive exploration
program has been launched with the target of doubling the present
reserve and resource base at Lefa.
Acquisition and Development of Masara Mine
Acquisition
The Company’s principal gold asset in the Philippines is the Masara
Gold Mine (“Masara”) in south-eastern Mindanao Island, which
ceased production in March 2000. The Company acquired its
interest in Masara through its acquisition, with its associated
Philippine partner, of approximately 72.87% of Apex Mining
Company, Inc. The transaction was concluded in December 2005.
Underground Development
The present mine plans and resource model are based on a
historical mining width of around 1.5-2.0 meters. Management
believes that both historical data and recent data from drilling and
underground sampling indicates a potential for an economic
mining width of 3-4 meters with only marginally lower grade than
the “core” vein. As a part of the ongoing drilling program for
2006/2007 of over 80,000 meters, the Company is also
investigating the potential for open pit mining in the south east of
the property where several of the 13-14 veins converge. Several new vein structures with encouraging grade levels have been
discovered as a result of the ongoing drilling program.
Plant and Infrastructure
During the year, the Company commenced refurbishment of the
existing 500 tpd processing plant (Phase 1) and commenced the
design and preliminary construction work for an additional 2,400
tpd processing plant (Phase 2), which will provide a total plant
capacity of 2,900 tpd. Commissioning of the refurbished 500 tpd
plant is anticipated in the fall of 2006 and for the new plant in the
second quarter of 2007.
Once fully commissioned, the Masara operation is anticipated to
have the capacity to process 2,900 tpd ore which is expected to
produce between 180,000 and 200,000 ounces of gold and
300,000 to 400,000 ounces of silver annually. The Company do
not expect to fully utilize the capacity of the plant in 2007 as
underground development will progressively ramp up toward the
end of 2007/early 2008.
The capital budget for the refurbishment of the existing 500 tpd
plant and construction of the 2400 tpd plant is currently estimated
to be approximately $60-70 million, of which $13.2 million was
expended to June 30, 2006. In addition, the estimated costs over
the next 18 to 24 months for extensive underground development
and infrastructure and a much expanded exploration program is
$20-30 million.
Nalunaq
Operations
After its initial start up in 2004, Nalunaq's ongoing focus has been
to improve the delivered grade. During the year, the Company
engaged Snowden Mining Consultants plc (“Snowden”) to review
the mining operations and identify areas where efficiencies could
be improved. The mine optimisation programme identified by
Snowden, is being implemented. The first phase of the optimisation
programme has focussed on reducing mining dilution through
improved blast design, geological control and supervision and
washing of stopes to maximise gold recovery.
The Company is pleased to report that the grades achieved from
Nalunaq for the year under review have been consistently higher
than the previous year. The average grade of gold shipped and
processed for the 2006 fiscal year was 19.0 g/t compared to 15.9
g/t for the 2005 fiscal year, an improvement of 19.5%.
Management believes the implementation of the optimisation
programme has contributed to these improvements, however, cautions that the grade variation observed between milling
campaigns is also typical of the nature of the style of the narrow
vein, high grade deposit being mined at Nalunaq.
The second phase of the mine optimisation programme has been to
review the mining equipment to ensure a sustainable balance
between mine development and stope production to increase
production rates. The Company placed orders for an additional
long hole drill rig, replacement scoops and larger 20 tonne
underground trucks together with ancillary mobile equipment.
Management anticipates that further improvements to mining
efficiencies and production rates should be realized during the last
half of 2006 as this equipment is delivered to site.
During the fiscal year, ore from Nalunaq was shipped to Rio
Narcea Gold Mines' El Valle process plant in Spain. This
arrangement will terminate at the end of 2006. The Company is
discussing a different arrangement at El Valle but is also examining
other alternatives for the long term processing for its ore, including
the preferred acquisition of a processing plant that will be owned
and operated by the Company.
New Gold Project in the Philippines
Prior to the end of the fiscal year, the Company concluded an
option agreement with Plethora Mining Corporation of the
Philippines to earn an interest in the Tandic Gold Project in southeastern
Mindanao, in the Philippines. Under the terms of the
agreement, Crew will acquire an option to earn an initial 50% of
the property through expenditure of USD $1 million on exploration
and development over a period not exceeding 5 years. Following
the 50% earn-in, Crew can then fund further exploration,
development and feasibility studies to earn up to 90% of the
project.
